The World Trade Organization

THE WORLD TRADE ORGANIZATION

MORGAN DUCHESNEY: 1999

INTRODUCTION

The purpose of this paper is to present a description and an analysis of the World Trade Organization (WTO) as a threat to democracy, and by extension, a threat to human rights and the environment. The facts presented in this paper are drawn mainly from three sources: the CMN2180 Website document, A Citizen’s Guide to the World Trade Organization and The WTO and International Trade Regulation. Any direct quotes will be appropriately cited and included in the endnotes. The related opinions and the conclusions drawn are solely those of the author of this paper.

THE WTO’s MINISTERIAL CONFERENCE IN SEATTLE: NOV. 29-DEC.2, 1999:
The WTO will be holding a ministerial conference for member state and observers in Seattle, Washington from Nov. 29 to Dec. 2, 1999. The main purpose of this conference is to finalize a “Ministerial Declaration”. According to A Citizen’s Guide to the WTO/MAI, they plan to develop previous commitments by member states to create committees to deal with the issues of agriculture, services and intellectual property rights. These issues are known to member states as the “built in” agenda. Some nations now wish to add the MAI (Multilateral Agreement on Investment), procurement and competition policy. Informed critics expect more deregulation which will favor private business concerns and harm the cause of democracy. Thussu accurately describes the WTO in the introduction to Electronic Empires when he writes:

“Globalization has moved economics beyond the authority of the state to the suprastate bodies such as the World Bank, the International Monetary Fund, and the World Trade Organization. The policies enunciated by such organizations, especially, the World Bank, often in alliance with TNC’s, has eroded the economic power of states, especially in the southern hemisphere."(1)

There is some discord between the U.S. and the European Union. The Europeans wish to launch a millennium round and the U.S. desires the established built-in agenda. Also, there are a number of developing countries whose representitives adamantly oppose further negotiations because they have suffered enough under the WTO and wish to avoid further damage to their cultures and economies. They, along with activist groups all over the world, wish to see major reversals of autocratic WTO policies that tend to favor the interests of transnational corporations (TNCs). They resent the fact that:

“To receive assistance from any of these organizations, a country must become a member state and agree to a regime of structural adjustment program (SAP) based on liberal economic theory. These policies demand opening the national economy in favor of liberalization - which entails cut-backs to social programs, privatization of state-owned and operated industries, more openness to foreign investment and trade, more labor flexibility and commodity-based development. (2)

The poor in developing nations like Brazil are particularly at risk when their governments agree to impose commodity-based agricultural policies. This means that subsistence-level farmers are forced by their wealthy landlords to grow crops desirable on the international market. When international markets for coffee or soybeans weaken, the poor farmers are left to starve because they have not been allowed to grow a variety of crops on their rented land, if they are actually still allowed to rent the land.. These so-called ”structural adjustment programs” truly do make “saps” of the poor in the developing world.

A BRIEF HISTORY AND DESCRIPTIVE ANALYSIS OF THE WTO:

The WTO is an umbrella organization that represents the signatories to many different international trade agreements. These include the General Agreement on Tariffs and Trade (GATT), the Agreement on Technical Barriers to Trade, Agreement on Sanitary and Phytosanitary Standards, Agreement on Trade-related Intellectual Property (TRIPS), Agreement on Trade-related Investment Measures (TRIMS), General Agreement on Trade in Services (GATS) and the Agreement on Dispute Settlement Procedures.

It has been said that the WTO is in reality a charter of rights and freedoms for TNCs. A close examination of the WTO reveals that this summation, popular among opponents of rampant globalization and unrestricted capitalism, is a very fair assessment of the WTO. It is a tremendously powerful organization with the authority to challenge and successfully force sovereign states to change their laws and policies which were designed to protect their citizens from pollution, poverty and other harmful eventualities. This is possible because the WTO has the power to levy severe economic sanctions against rebellious member states. A consensus of member states can overturn a WTO ruling but this is not likely to happen. The WTO represents a very real threat to democracy that will only increase if the various member states consider the upcoming Seattle conference a success.

The dominant members of the WTO include the U.S., the European Union (U.K. Germany, Italy, Switzerland, Belgium, and others) and Japan. These member states are referred to as the QUAD countries and often make decisions behind closed doors that affect the entire WTO membership and the rest of the world. The WTO is not a league of equals. There are 134 member states and another 33 nations who enjoy the dubious honor of observer status, which means that they are free to sit and watch powerful others decide the fate of their countries.

In order to fully understand the WTO it is necessary to follow history back to the year 1944, when the Second World was in its final bloody stage. In July of that year, representatives of 44 nations met in Bretton Woods, New Hampshire to create a plan for a “postwar financial order.” Their main purpose was to prevent a repeat of the economic chaos that had engulfed the world during the Great Depression of the 1930s. They created the World Bank (WB) and The International Monetary Fund (IMF).

The Washington-based IMF has 182 member states and its ostensible goal is international financial stability. It claims to be interested in helping poor nations with their debt-repayment problems and to this end all members contribute to a common fund. The WB claims to be in business to assist developing countries in strengthening their economies. They claim to be seeking a “world free of poverty.” The WB operates through four agencies called the International Development Agency, the International Finance Corporation, the Multilaterlal Insurance Agency and the Inter-American Development Bank.

As mentioned before in this paper, there are coercive conditions a prospective client state must agree to before they are eligible for assistance from one of the WB’s agencies. The structural adjustment programs often entail massive restructuring of the political and economic infrastructures of the potential recipient state to suit the particular needs of the TNCs who wish to operate in their territories. A good example of this would be Nike’s “arms length” operations in Indonesia. This represents a classic example of the use of “soft” (economic) power being used to create TNC hegemony in the developing world. This is a safer than exercising “hard” military power, although nations like the U.S. are still willing to do this if the stakes are high enough. The real reason for the Gulf War was not protecting the freedom of Kuwait but protecting the flow of crude oil to the West. It is much safer to change the ideology of a weaker state through economic leverage that it is to send in the troops to make the nation in question safe for capitalism. The WTO’s reaction to the current changes to the French work week, which has been legislated to 35 hours, will bear watching as France is a military force to be reckoned with.

The 1947 Bretton Woods agreement also included the GATT. There have been two further stages to this agreement. The WTO’s creation in 1995 was facilitated by trade talks in 1986 called the Uruguay Round. This meeting of all the world’s dominant nations set the stage for the establishment of the WTO. Now that the WTO is an international reality, its critics are raising serious concerns about its value to mankind and the very legitimacy of its vast authority. The author of this paper believes that sweeping powers of the WTO pose a terrible threat to democracy around the world. This vast power is best expressed by the following statement that outlines how WTO rulings may subvert the democratically-legislated policies of sovereign states if these laws crimp the profitability of TNC operations:
“…the Dispute Settlement Understanding (DSU) of the WTO permits states to challenge domestic, fiscal, environmental and economic policies of other signatories and – to the extent these are now governed by WTO agreements – to require changes to domestic law.” (3)

The Canadian Example:
There was a case a number of years ago when Canadian gasoline-additive regulations were overturned under the North American Free Trade Agreement(NAFTA). Canada had been trying to prevent the importation of U.S. gasoline containing an additive that had been outlawed in various U.S. states because of the threat it posed to public health. The Canadian government would have been forced to pay a heavy financial penalty to the U.S. manufacturer of the additive because the so-called protectionist policy interfered with the profit margin of the corporation.

Another notable example of the WTO in action was the 1997 ruling against Canada regarding split-run magazines. These are magazines like Sports Illustrated which feature the same content bur carry different advertisements in different countries. The U.S. successfully challenged Canada’s 80 per cent import duty at the WTO. Canada dropped the tariff.

The Canadian government is currently embroiled in a nasty trade dispute with Brazil over aircraft manufacturing and the government won’t declare Canadian cultural products off-limits art the conference because Canadian trade officials feel it would harm the nation’s fortunes during the negotiations. To the further detriment of the Canada’s chances at the bargaining table, Prime minister Chretien recently replaced the government’s senior and highly-respected trade negotiator with a political appointee, former Trade Minister and Chretien supporter Sergio Marchi. His relative inexperience speaks volumes about the Canadian government’s attitude toward the WTO. The author of this paper believes that the Liberal government believes that our future is so connected to that of the U.S. that Canada is best served by making as little noise as possible at the conference. However, it is feared that Chretien-style security practices (AKA APEC) may mar the conference.

HOW THE WTO WORKS:

One of the main purposes of the WTO is the deregulation of global trade. This mission is premised on the popular but false assumption that globalization is a completely positive phenomenon. The inevitability of globalization is a mantra emanating from the mouths of those power concerns who stand to gain the most from it. This unfortunately excludes the vast majority of people in the developed world and an even greater percentage of those in poorer nations. The questionable notion that life in Western industrialized nations is the finest example of human endeavor and thus is worthy of imitation also supports the push to industrialize the entire world. This self-serving theory does nothing to improve conditions in countries that lack and require the basics of life before they are ready for embrace large-scale industrialization.

According to the 1998 text, The WTO and International Trade Regulation, The WTO has five main functions. They are:
“1. To facilitate the implementation, administration and operation and to further the objectives of the WTO Agreement and the Multilateral Trade agreements…
2. …to provide the framework for implementation, administration and operation of the Plurilateral Trade Agreements…
3. …to provide a forum for negotiations among its members concerning their multilateral trade agreements…
4. …to administer the Understanding on Rules and Procedures Governing the Settlement of Disputes and the Trade Policy Review Mechanism…
5 …with a view to achieving greater coherence in global policy-making, to cooperate, as appropriate, with the International Monetary Fund and the Bank for Reconstruction and Development and its affiliated agencies.” (4)

It is interesting to note that private citizens have no official standing at WTO proceedings unless they are representatives of business interests. Those with environmental, social justice or human rights concerns are considered an impediment to free trade and must take their grievances to their respective governments and the domestic courts, who are increasingly fearful of the WTO. This is another example of how the WTO poses a serious threat to established democratic institutions because the WTO has the power to punish member states for enforcing their laws.

Now this paper will deal with the most autocratic aspect of the WTO, The Dispute Settlement Process. This is the tool TNCs use to challenge and ultimately defeat the so-called protectionist policies of member states. According to A Citizen’s Guide to the World Trade Organization:

“The WTO allows countries to challenge each others’ laws and regulations of violations of WTO rules. Cases are decided by a panel of three trade bureaucrats . There are no conflict of interest rules and the panelists often have little appreciation of domestic law or of government responsibility to protect workers, the environment or human rights. Thus, it is not surprising that every single environmental or public health law challenged at the WTO has been rule illegal.”(5)

These panelists meet secretly and their rulings are usually final. There is an appeal process in place but none of the evidence presented to the panel may ever be viewed by either party to the dispute. This practice is a direct contrast to the democratic legal traditions of most of the QUAD countries. The last recourse for rebellious member states is to stand fast and pay heavy economic penalties. This is hardly a useful alternative and the penalties are harsh enough to make this option very unattractive and serves a powerful deterrent role.

Those who praise the WTO believe that new system is preferable to the “more traditional methods” used in the past to resolve trade dispute: diplomacy, military threats and even direct military action. The latter is still used when the QUAD countries life the U.S. and the U.K. feel it is necessary to send a strong message to the rest of the world about the necessary predominance of free-market capitalism. While the 1991 Gulf War predates the WTO’s formation by four years, the dominant capitalist democracies who participated in the war saw Saddam Hussein as a very real threat to the flow of crude oil to the West. Thus he was dealt with swiftly and brutally. Actually, his military machine and the hapless Iraqi people were dealt with swiftly and brutally.

While supporters of the WTO and international trade agreements generally agree on the ultimate necessity of such arrangements, the authors of The WTO and International Trade admit that there are areas of the WTO that need improvement or modification. They write:

“…there are other, more deep-seated problems within the WTO which need to be addressed. These are fundamental to the spirit and nature of the new institution and relate to sensitive issues of transparency, accessibility and accountability to the electorates of the states.”(6)

They go on to further explain their ideas on the concept of transparency and they offer some mild criticism of the Dispute settlement Mechanism. Unfortunately, they (the authors) are operating on the naïve assumption that the WTO is a benign body whose ultimate goal is the betterment of mankind through free trade among nations. They have been seduced by the “invisible hand” of Adam Smith, as have so many others. The notion of the “survival of the fittest” has been replaced by the survival of the greediest.
This type of quasi-Darwinian nonsense is foisted upon the citizens of democratic nations who are outraged by cuts to social programs and government efforts to privatize as many of their operations as possible in the interests “efficiency and accountability.” Right here in Ottawa people are feeling the heavy hand of globalization. Newbridge has just laid off 300 worker in another bid to become”more competitive.” The problem here is that the owners of such businesses are never satisfied and worship growth as the greatest virtue. They have support in high places. The Premier of Ontario, Mike Harris is one of the most vocal but least articulate supporters of these ideas. Unfortunately, he has the solid backing of the more prosperous segments of Ontario society and thus feels free to do as he wishes.

CONCLUSION:

What the WTO is really dedicated to is the survival and predominance of the most greedy, amoral and strong members of the human race. It is an organization devoid of mercy or compassion for the weak. As feminist scholar Gertrude Morin wrote in On The Brink of Annihilation: “We need to arrive at a new concept of intelligence as a quality that enables us to survive as a species by going beyond mere survival to a full, caring appreciation of life.” (7)

A massive protest effort is planned for thew upcoming WTO conference in the “MAI free-zone” city of Seattle where ministers and trade officials will attempt to draft plans for the future of international trade in the new millennium. Organizations like Greenpeace, the Sierra Club, Friends of the Earth and the Council of Canadians have planned major demonstrations and taken out large advertisements in the big U.S. daily newspapers in their efforts to derail the talks as the MAI negotiations were derailed. They see this success as a major precedent and they are banking on its momentum to assist them at Seattle.

These activist organizations see the unrestricted flow of capital around the world as a major cause of economic destabilization and they believe that the people behind the IMF and the WB manipulate financial markets for their own benefit at the expense of economic regions like Southeast Asia. The recent economic meltdown in Southeast Asia is a good example of this. Many concerned citizens believe that the WTO will try to secretly include the MAI in the new round of negotiations.

It remains to be seen what will transpire in Seattle at the end of the month, but if recent demonstrations in Ottawa and the APEC summit are any indication of the way the demonstrators will be treated, they would be well-advised to be careful. The U.S. government has a far worse record of abusing the rights of peaceful demonstrators, even killing them (Kent State), and the stakes are so high that incredible pressure will likely be brought to bear on law enforcement officials to limit the effectiveness of the demonstrations. With demonstrations of the magnitude expected, anything is possible.

What is at stake in Seattle is the future survival of humanity because the interests who wish to turn the whole world into one borderless entity where consumer capitalism rules supreme pay only lip service to egalitarian principles. It is not too late for the people of the world to refuse to trade their democratic human rights for more consumer choices.

1. Electronic Empires. Pg. 3, Thussu, D.K.
2. The Byzantine World Of international Trade.pg. 1. Shade,
3. The WTO and International Trade Regulation. Pg. 13. George, MacVay, Rutley.
4. Ibid. pg.15
5. A Citizen’s Guide to the World Trade Organization. Pg.5. The Working Group on the WTO/MAI.
6. The WTO and International Trade Regulations.pg. 16. George, MacVay, Rutley.
7. On The Brink of Annihilation. Pg.6. Brean, Morin.